A row between an Atlanta insurance company and the homebuilders’ trade association that founded it is leading Georgia State Insurance Commissioner John W. Oxendine into uncharted legal territory.

“There are a lot of matters of first impression in this case, because we’ve never really had this type of dispute,” said Oxendine (see photo), adding that he and his staff have consulted with the state attorney general on the dispute.

At issue is Builders Insurance Group, an Atlanta-based company that sells workers’ compensation and general liability insurance to homebuilders. The company was founded in 1992 by the Homebuilders Association of Georgia (HBAG). The status of that affiliation – between Builders Insurance and HBAG – is at the heart of the groups’ current fight.

HBAG argues that the directors of Builders Insurance have overpaid themselves. HBAG counsel, Nelson Mullins Riley & Scarborough corporate partner Charles R. “Rusty” Pickering, is advising the group on a proxy battle for control of Builders Insurance, introducing a slate of six new directors.

Builders Insurance president Patrick Mitchell counters that HBAG is trying to seize control of the company as a way to protect its turf as the dominant trade organization for homebuilders. King & Spalding corporate partner Alan J. Prince is advising Builders Insurance on the matter.

An additional prong in HBAG’s strategy is to rewrite Builders Insurance’s charter. That’s where Oxendine comes in, and it’s also what the state Insurance Commissioner says is new territory.

Pickering argues that Georgia state law stipulates that a mutual captive insurance company like Builders Insurance can have only one endorsement agreement with a trade organization. A mutual captive insurance company is owned by its policyholders, and can only sell policies to members of a specified organization. That organization had been HBAG, but Builders Insurance last year terminated its endorsement agreement with HBAG and inked a new pact with a rival group, Contractors Benefit Association of Chesterfield, Mo. But Builders Insurance continues to service policies held by members of both HBAG and Contractors Benefit Association, in violation of state law, Pickering said.

Further, Contractors Benefit Association doesn’t offer the type of industry self-regulation services that HBAG provides, Pickering said. Those types of services are also required by Georgia law, in order for Builders Insurance to enjoy its status as a mutual captive insurance company.

Oxendine said his staff recently discussed these matters with Attorney General Thurbert E. Baker and his staff and came to the conclusion that mutual captive insurance companies can have endorsement agreements with multiple professional trade organizations. However, that consensus may not be set in stone.

Pickering filed a Form A petition on behalf of HBAG, asking Oxendine to rule on these questions. Oxendine said that the content in HBAG’s Form A petition was unusual, and his staff is reviewing how to proceed. The result could be a different ruling on both legal issues presented by Pickering, Oxendine said.

“We’ve never actually seen a Form A filing done quite like this one, so my legal staff is looking at what we can do,” Oxendine said.

Meanwhile, Builders Insurance is trying to rebuff HBAG’s efforts. On Monday, Builders Insurance mailed letters to its policyholders urging them to reject HBAG’s proxy nominees. Policyholders have until July 21 to return their proxy cards.